FedEx Pleads Not Guilty to Shipping for Illegal Pharmacies

FedEx Corp. pleaded not guilty to U.S. charges that it delivered pain pills, anti-anxiety drugs and other controlled substances for illegal Internet pharmacies in a case carrying the potential for hundreds of millions of dollars in fines.

The operator of the world’s largest cargo airline was indicted by a federal grand jury July 17 on 15 counts of conspiracy to distribute controlled substances and misbranded drugs and drug trafficking.

If convicted, FedEx may face a fine of twice the gains from the conduct, alleged to be at least $820 million for it and co-conspirators. The company entered its plea today in San Francisco federal court.

“We are a transportation company, not a pharmacy, not a website, not a doctor,” Cris Arguedas, a lawyer for FedEx, said at a hearing today in federal court in San Francisco.

The case is a part of a federal crackdown on organizations and individuals to combat prescription drug abuse. United Parcel Service Inc. agreed last year to forfeit $40 million in payments it received from illicit online pharmacies under a non-prosecution agreement with the U.S. Justice Department.

Internet Pharmacies

FedEx delivered drugs to Internet pharmacies that supplied pills to customers who filled out online questionnaires and were never examined by doctors, knowing these practices violated federal and state drug laws, the government alleged.

FedEx vowed to fight the government’s charges, saying it can’t be responsible for the contents of the 10 million packages it transports daily and that policing customers would violate their privacy.

“The company has cooperated with the Department of Justice throughout its multiyear investigation,” Arguedas said after today’s hearing. “FedEx will continue to defend its conduct and its people.”

The company said last year that an indictment or prosecution would threaten a basic tenet of its shipping business: not opening packages. Revenue from online pharmaceutical shipments is a small percentage of total sales, the company previously said. FedEx reported $44.3 billion in revenue for fiscal 2013.

The company said in a Feb. 18 regulatory filing that a conviction could be “material.”

Under the U.S. Controlled Substances Act, a shipping or freight company is allowed to possess and transport drugs “in the lawful and usual course of its business” without registering with drug enforcement authorities. The law regulates the manufacture and distribution of narcotics and certain other drugs and chemicals used in the illegal production of controlled substances.

Consumers are turning to online pharmacies because of the convenience and privacy of purchasing medicines there, and as insurance companies encourage home delivery for long-term medications, according to the U.S. Food and Drug Administration website.

FedEx Corp. pleaded not guilty to U.S. charges that it delivered pain pills, anti-anxiety drugs and other controlled substances for illegal Internet pharmacies in a case carrying the potential for hundreds of millions of dollars in fines.